Unruh's political career began as an unsuccessful candidate for the California State Assembly in 1950 and 1952. He was elected as a member of the Assembly on his third attempt in 1954. In 1956, he was an unsuccessful candidate for Presidential Elector on the Democratic ticket for California. During 1959, he authored California's Unruh Civil Rights Act, which outlawed discrimination by businesses that offer services to the public and was a model for later reforms enacted nationally during the 1960s and 1970s. Unruh was Speaker of the California State Assembly from 1961 to 1969 and a delegate to Democratic National Convention from California in 1960 and 1968.

As a national figure in the Democratic Party, he often feuded with fellow Democrat GovernorPat Brown (1959–67) and was a case-study in the James Q. Wilson treatise on machine politics, The Amateur Democrat.

When he ran for State Treasurer in 1974, the post was considered a "political backwater."[2] Unruh's radio advertisements assured voters, "Make no mistake about it, I really want this job." Once elected, Unruh transformed the office into a powerhouse of state and national politics. The Wall Street Journal noted he became "the most politically powerful public finance officer outside the U.S. Treasury".[2] California pension funds were a major source of revenue for Wall Street underwriting firms, and Unruh secured campaign contributions in exchange for steering business their way. The New York Times said he had taken over "an obscure post whose duties had long emphasized bookkeeping. In characteristic fashion, he soon transformed the job into a source of financial and political power that reached from California to Wall Street."[3] Because as Treasurer he was ex officio member of many California boards and commissions, Unruh oversaw "the raising and expenditure of virtually all the state's money and consolidated his influence over billions of dollars in public investments and pension funds."[3]

He served as State Treasurer from 1975 until his death from prostate cancer on August 4, 1987.

According to an apocryphal tale, Unruh was nicknamed "Big Daddy" by Raquel Welch, when the two were allegedly romantically involved. Welch denies the claim. It is more likely that the nickname comes from a character in the Tennessee Williams play, Cat on a Hot Tin Roof.